Payroll Basics for Small Business Taxes

Posted on October 27, 2015

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Small Business Taxes Rely on Payroll for Accuracy

small business taxesNo matter how simple or complex your small business taxes, you need to set up a payroll system. While many business owners want to avoid unnecessary paperwork, payroll does not fall into this category. An accurate payroll system that follows federal guidelines keeps the IRS from flagging you for an audit and will give you a better handle on your finances and what to expect on your tax return.

If you are just starting out with a new business, get your company on track with payroll right from the start. It may be helpful to employ a tax accountant to help you ensure that you have the right procedures in place.

Small Biz Trends highlights the steps you should include as part of your payroll process:

  1. File your Form 941, The Employer’s Quarterly Federal Tax Return. You need to make the deposits for withholding income tax, Social Security tax or Medicare tax from your employees’ paychecks. This means you must also file new hire reports on time so that you have their withholdings recorded on your quarterly return.
  2. File a W2 for each employee. If you pay any employee at least $600, you must issue a W-2 that lists their earnings, withholdings and amounts paid into a retirement account, such as a 401(k).
  3. File Form W-3 with the Social Security Administration. This is a step where it is important to have a tax accountant ready to guide you, because many owners find this to be a confusing part of small business taxes. Form W-3 shows total earnings, Medicare and Social Security wages, in addition to withholdings for all of your employees for the year. You are required to submit the form before the end of February.
  4. Have your employees update their W4s. A W-4 is the form that tells you how much of the federal tax to withhold from your employee’s paycheck. Don’t forget to check in with employees that have left during the year to be sure that you have an updated W-4 from them.
  5. Make sure that all of your employees are authorized to work in the United States. Have your employees each fill out a Form I-9, which is the Employment Eligibility Verification. With this form, you can confirm their identity and their authorization to work in the U.S.

If you need help navigating the requirements of the payroll guidelines, we are ready to help. At AccuBiz, we work on small business taxes for a variety of clients. We provide a range of accounting, whether you simply need a few questions answered about how to set up payroll, to full accounting services. Give Bert Doerhoff, CPA a call to set up an initial appointment and we will discuss your business’s needs.

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Posted in: Small Business